-
OK everyone knows Gibson's are flying off the shelves at CME. Basically 10 years ago you could get a new 175 for around $2.5K and right now a bit less from CME.
I am going to ballpark that it costs Gibson around $800-$1000 to manufacture a ES175. They sell it to CME for $1600 and CME sells it for around $2300. A comfortable profit for both parties.
It seems Gibson really jacked up their prices after the fretboard raid. We the consumers obviously got to finance that fiasco.
Gibson has finally outpriced themselves. They are in financial trouble to boot. It seems that with the market saturation Gibson will have no choice but to continue to drop their pricing.
$5K IMO is a fair price for a production L5 not the $9k-$10k they have been asking.
I am very interested to see what happens next. $5k new L5's would fly off the shelves also.
A professor very long ago told me it is better to make $1 profit each off 10 items than $10 off of 1.
Interesting times in the future of guitars I do believe.
Their has never been a huge profit margin in car sales. It has always been quantity that drove profit margins.
Certainly is not a guitar seller market right now. You do not see a lot of movement on eBay and Reverb.
-
10-18-2017 06:51 PM
-
An L5CES for $5k would be outstanding! Preach Vinny!
-
Originally Posted by vinnyv1k
Musical instruments the dealer prices are all over the place. Basic models usually were a full markup, the the higher end the model the smaller the markup. So for a basic model that lists for $2000 the dealer cost would be about $1000. But then there gets to be discounts different dealers get for being high volume or for large orders etc. A high ticket guitar like an L5 dealer cost might only be 15% under list price very little wiggle room. Then there time like what appears to be what Gibson is doing now and that's trying to clear the warehouse to before new model runs. Also Gibson is cash strapped based on things I've read so they are selling to CME and Guitar Center and are make deals.
I would bet Gibson production runs drops a lot for this next year to keep tying up cash in warehoused guitars. I think that is an advantage for Fender being build time for a solid body guitar is way shorter so can do quick runs of guitars as necessary.
-
I know Gibson wants to go totally internet based with maybe GC being the lone brick and mortar plus there internet sales. Trouble now is MF, AMS, Zz, SA, etc do not wiggle on map pricing. CME being such high volume does wiggle on price even without the current sales. When the 2016's 1st came out I paid $1500 less with CME than all the others on a 175 new w/warranty. All the other dealers like Dave's are no longer Gibson dealers. So are you going to buy a new 175 from MF for $5k or CME for $3500.
Gibson's price structure has to be totally revamped for all it's dealers to remain viable. You don't see MF doing smoking deals.
CME did this exact same thing last year. When it's over I can see a lot of guitar buyers holding off till next Sept.
A repeating presidence has been injected into the buyers market and most guitarists simply will never do a map price.
-
I wouldn't even consider purchasing a new Gibson previously, they were just so expensive. Even the cheaper non-archtops; ie. lower end Les Pauls etc. were overpriced. The CME deals have meant that actual musicians can have a shot at buying them.
Gibson in some ways are in a pickle because they're competing with their former-self. Pretty much any brand new Gibson archtop is out of my price range, however vintage Gibsons, while still not inexpensive seem to represent better value. That's not even considering the argument of an older Gibson being superior or inferior to a new one.
-
OK - so you are going to "ballpark" - meaning you are going to guess. Fine. You speculate about profit per unit, but even if you're in the ballpark it may be irrelevant. What about all the expenses for the company? The top line is certainly important but the bottom line is the objective. (expenses that apply - plant, equipment, advertising & marketing, R&D, salaries, benefits, insurance, legal). Originally Posted by vinnyv1k
You also point out that they are in financial trouble. But how can that be, if as you say they're making a healthy profit per guitar?
Oh - BTW - their prices swelled a few years ago but they are reduced now. Their best archtops that is. I watch their website too since I've owned quite a few. Your statement about "us" funding "the fretboard raid" seems highly speculative at best and baseless at worst - if you mean guitar buyers. The reality is that the taxpayers funded it because the feds executed it, maybe that's what you mean?
You think that an L5 would be fairly priced at $5K, but also say at they would fly off the shelves at that price. Have you considered that if they would fly off the shelves it would be because they wouldn't be fairly priced - that is, they would be marked down below market value? Have you also considered that NO guitar at $5K is "flying off the shelves" in 2017 (if they ever were)?
L5s in the late 1970s retailed at around $2,500, in the late 1980s $5k. Given that was 30 years ago, how would you compare its price appreciation over that period relative to a broad sampling of other consumer goods?
If you want a great American, hand made, archtop guitar in this style at a more affordable $5K price why not look at Campellone? If money is your only parameter, go for it.
But remember this, Orville Gibson has been dead for about a century, and "his" guitar prices are what they are. What will the market demand be for a Campellone (or any other fine independent builder such as he) after he has been gone 99 years? What is it now? Are his guitars flying off the shelves at 5K?Last edited by Jazzstdnt; 10-18-2017 at 11:52 PM.
-
In 1967 an L-5 with case listed for $980 Using an inflation calculator that comes to $7158 in 2016 (we do not know yet what level of inflation exists this year). Assuming some level of discount, a $5000 L-5 might not be unreasonable, but this assumes that Gibson is able to make a profit selling the instrument to the dealer at 50% of cost ($3577). I do not know if Gibson and their dealers were at Keystone (retail being double wholesale) in 1967. Another assumption is that the cost of tonewoods necessary to make an L-5 have only risen in cost with inflation. With direct sales through the internet being a new paradigm for instrument makers (who once had to rely on a network of dealers), I think a $5,000 L-5 might be feasible. But the market is so small, Gibson might choose to uses it's "brand value" to charge a premium price. If their economists conclude that they will sell the same number (or close to it) of L-5's at $5,000 as they will at say, $8,000, they would be foolish to sell them for $5,000. At the end of the day, making guitars is a business and the goal is to make a profit.
-
What is prestige pricing? definition and meaning - BusinessDictionary.com
Part of what we pay buying new Gibsons is indeed in the name, and that is by design. Sure, there are a lot of hidden costs in a guitar, but there's also the marketing aspect: any company setting lower prices for its product is stamping lower value upon those products. Nothing wrong with that, or the obverse, wherein a company overprices its product in order to deliver cachet.
You simply have to understand that when you lay out large money for a brand-name good, part of your outlay (be it BMW, Gibson, or Starbucks) is spent to buy the name on your car, guitar, or cuppa. In that sense, price is perception. Gibson knows this, and they price accordingly, just like most other businesses.
-
They can do two thing. Either reduce price to sell more units ... or produce less units and keep the high price. We'll see what happens.
That being said Gibson USA has for many years started each year with very high prices on their guitar then when the summer ends they drop and the remainder is finally blown out end of year. An example would be a standard SG, which over here in scandinavia starts at around 1700$ which is dropped to around 1000$ this time of year .. rince repeat next year ...
But I doubt the archtop marked has an audience that will let them sustain that behavior .. also they switch up a lot of things to keep the new models interesting. Different colors and the SG alternate between the batwing and small guard. Some years it's the 57s and some the 590/598 combo etc.
But then again we are starting to see similar stuff at Memphis. One year there a '59 ES-335 then next year it's a '63 version. They've just introduced the ES-275 recently. The ES-330 are currently '61 versions with bigsbies. The good thing about this it that it installs a sense of urgency. If you don't buy that limited run ES-guitar that you've fallen for, then maybe it will be gone for good next time around.
-
Hmmm in 1977 I bought a brand new Byrdland for $1200. In 1978 a brand new Super 400 for $1800. In 2008 a brand new L5 Wes for $5.5k.
Jazzstndt get your facts straight.
BTW ....Gibson is all I play. All archtops.Last edited by vinnyv1k; 10-19-2017 at 10:32 AM.
-
I find it interesting to look at old prices and run them through inflation calculators, but no product sets its prices using inflation calculators. The cost of making a guitar is based on what you are spending on materials, tools, and labor. When one of the tools is a computer or a robot, the inflation calculator tells you almost nothing.
-
This is true. Gibson has managed to justify premium prices at scale for quite some time. They enjoyed a unique position wherein they could both increase volume of production and profit per unit. For one, we can assume that all expenses have reduced over time (maybe not wood) for Gibson. But capital equipment and labor are sure to be cheaper to Gibson now than they were decades ago. For a company like Gibson, an economy of scale was reached years ago. Comparing based on consumer prices makes little sense. What is shows is that Gibson has relied strictly on demand and not on cost to set its prices. But this is all changing. Nowadays, as demand for high end guitars recedes, other companies have exploited the gap created by Gibson and have entered the market with more affordable alternatives of comparable quality. Originally Posted by nopedals
I acknowledge that everything I said is unverified conjecture. Since Gibson is a private corporation, we can't confirm these details as outsiders.
-
[QUOTE=vinnyv1k;810024]OK everyone knows Gibson's are flying off the shelves at CME. Basically 10 years ago you could get a new 175 for around $2.5K and right now a bit less from CME.
I am going to ballpark that it costs Gibson around $800-$1000 to manufacture a ES175. They sell it to CME for $1600 and CME sells it for around $2300. A comfortable profit for both parties.
It seems Gibson really jacked up their prices after the fretboard raid. We the consumers obviously got to finance that fiasco.
Gibson has finally outpriced themselves. They are in financial trouble to boot. It seems that with the market saturation Gibson will have no choice but to continue to drop their pricing.
I have a different take on this. If Gibson is getting close to default on their debt, they may be looking to reorganize, or maybe even do a Ch. 11 bankruptcy reorganization. Typical consumer bankruptcies are simple and cheap, and they can be done for as little as $500 sometimes.
With big complicated companies, it is a whole different ballgame. Entering bankruptcy means a lot of legal work, and you need to have enough cash and ready assets on hand to file initially, and "keep the boat afloat" until interim bankruptcy financing, is available. That requires bankruptcy court approval, and if you file on Day 1, there will be some time period of minimum a couple of months to notify creditors, and present the interim financing plan to the bankruptcy court for approval. In the meantime, employees and utilities, etc. need to be paid for their post-bankruptcy date services....that takes cash.
This is all speculation on my part.
Reorganizing a company like this can be tricky. The parts of the company that will remain are surely more valuable on an ongoing basis, than on a liquidation basis. Probably Henry J. will go, as he seems to have gotten in over his head, and any new money provider will probably want new management. Keeping consumer and customer confidence through the whole process can be daunting.
I worked on a $4 Billion (revenues) restructuring of a publicly traded contracting services company...the holding company entered bankruptcy with over 200 subs operating under different names. For the most part, the operating subs were unaffected...the debt was held at the parent level with the insurance company senior lenders getting 38 cents on the dollar, and all the equity in the reorganized entity....all old, public shareholders were completely wiped out....old management was kicked out and left to twist in the wind facing SEC and shareholder suits, but the company survived in a smaller state, and has been restored to profitability. Over 18 months, we saw corp. headcount go from 120 to 36, and I was friendly with a guy in the CFO/treasurer's ofc., and there were many times when they were frantic about getting through the day with enough cash on hand, to make it to the next day.
If they're planning to do this, this could explain their "blowout" selling behavior.
I sincerely doubt Gibson cares much about the pricing of the jazz guitar market, which is a small part of their business...for the most part, a lot of buyers are pretty price indifferent, and from a "premium pricing" standpoint, they are not wrong to try to get top dollar. "US made, world played" is actually not a bad strategy....they are never going to be the cheapest cost producer, and cheapening up their product to go head to head with Asian manufacturers is a losing ballgame. They are kind of analogous to (real) French champagne....they invented the product, they produce it superbly well, but there are now cheaper competitors that challenge it more aggressively, than in the past (Napa Valley sparklers; Cava; etc.)
CBS came pretty close to driving Fender into the grave. The music instrument basis is tricky and history is littered with many names long since gone....Harmony, Vega, Valpro, Larsen Bros. were like the Packard, Hudson or Plymouths of yesterday.
I do believe Gibson has a venerable reputation, and history, which would ensure that it survives in some form.Last edited by goldenwave77; 10-19-2017 at 04:48 PM.
-
The ironic thing is that on this side of the pond
we do not see the massive price reductions
currently available in the USA , the plethora of
the latest Es175’s in SB are priced at £4K here
and are awaiting delivery. Gibson will not allow
dealers their choice of models but must order
en bloc a large number of instruments of
Gibson’s choosing. At least that is what two
major Gibson retail stockists here have said.
No sour grapes here, but I think Gibson might
Just be shooting themselves in the foot with
their current dictatorial attitude . Just my 2p
-
I snipped the bulk of what you wrote because I think it's spot on. Originally Posted by goldenwave77
Regarding the snippet of your quote above, considering the abysmal escapes in quality they have had in the most recent years, I can't for the life of me figure how Gibson could possibly cheapen their product line. Not with quality in mind for sure.
They "could" take the $500+ neck/head binding off all models, go VOS on everything, make the case and maybe even strings optional? Earl Scheib outsource the spray booth (an old car painting firm here in the U.S.) or maybe even "bare bones" DIY models? :-) So, cheapening is for sure not a tack.
Tightening up their QC, eliminating "model of the day" jerky colors, focusing on quality and go toe to toe with foreign brands. The auto industry in the U.S had to do it from the 80's on. In short make the brand WORTH the money.
We'll see, I hope.
-
Goldenwave77, that is a very astute observation regarding the possibilities of Gibson as we know her.
That said, all we really know from the news is that Gibson defaulted on a big loan. As you and I (and perhaps a few others here) know, it takes more than one unpaid creditor to force a company into BK (that is bankruptcy, not Burger King folks
). It is quite possible that with the CME blowout, Gibson has raised enough funds to pay off that creditor and it is back to business as usual.
Or perhaps the end is near for Henry J and his fellow officers. Who knows? In the car business, it has been a winning strategy to come up with new models each year and blow out the unsold inventory at the end of each year. I think we are seeing some of this with the CME blowout.
IMO, Gibson, like Harley-Davidson and a few other brands represents American Exceptionalism, a product that is head and shoulders above the rest. It is OK to prefer Honda motorcycles and Ibanez guitars (they make great products to be sure), but those who want the tradition, the long term value, and the prestige will have to pay the price of admission, and the free market will determine that price.
It is pretty simple really. If you do not like Gibson guitars, do not buy one. If you think they are too costly, buy something cheaper.
As for me, I will be riding one of my Harley-Davidson motorcycles to lunch today and tonight, I will be playing one of my Gibson guitars on my gig (6:30 Downbeat. Gayle's in Capitola CA). Life is sweet.
-
Gibson's pricing history is interesting ...
My memory is a big price reduction in the mid 80s ... and then another one around 2003 ....
They push the envelope of their prices until it hurts sales too much and then they back down .. usually with discounts to the dealers and every decade or 2 a reduction in MSRP
From what I am seeing they're probably due a MSRP reduction
The big question for the guitar industry of course is whether the musical instrument sales, especially guitars, are down due to the younger generations moving away from the guitar or have the 30 somethings and younger been too busy struggling to make ends meet while living in their parent's basement.
A good economy could bring back the guitar market .... but if younger folks are just not playing guitar that may not help so much.
IIRC the fretboard raid business cost Gibson $2 million in legal fees .. so that cost would surely be passed on to the dealers who pass it on to the consumer ... more or less
-
Gibson is in trouble for a number of reasons, some of which have nothing to do with guitars. Starting around 2011, they bought a bunch of electronics companies, including Cerwin-Vega, TEAC, Onkyo, Pioneer, and Phillips. My guess is that those purchases are behind a lot of their debt. Seen any really hot sellers from those brands recently? They are also carrying Baldwin pianos, another downtrodden market. And they spent $40 million on their auto-tune system, which makes the fretboard wood fiasco seem like a pimple in comparison.
Add to that a culture which seems to pride itself on poor quality control and lousy customer service. They are a long way from the days of Orville, or Loar, or McCarty. It’s ironic that the MBAs who rescued the company from Norlin may finally be driving a stake through its heart.
Sent from my iPad using Tapatalk
-
It's the same in Australia - quick search on Google for a 175 shows a sale price of $7649 (a bit over $6000 USD), rrp $8999AUD. It's absolutely insane. There is no ES-175 worth that kind of money. Originally Posted by silverfoxx
-
no we dont get those kinds of sales, but a regular 175 is a bit below 4k .. and they do tend to collect dust in the stores and will go usually end up on sale ... not cme sale, but sale none the less. Originally Posted by silverfoxx
Gibson ES-175 Figured VintageSunburst - Thomann UK
-
Some more reporting on Gibson. Gibson May Default On It's Debt. Also Fender & Gc Credit Ratings | A Guitar Forum
-
Shit. Steinway's in trouble too eh? I was thinking about them as I wrote my last post. Their prices for new pianos are frightening. ($75K+). But it's cool.
I remember a custom home builder saying "we aren't building pianos ya know". What he meant was, despite charging $1M+ for a home, that level of precision wasn't part of the bargain. Waaaaaaat?
Not to worry about all this financial stuff though. Gibson, Fender, Steinway can all go bust and they WILL be bought by someone else who will keep the name going. Who give a rat's patooty (spelling?) who owns them at any given time?
Life is short, art is long.Last edited by Jazzstdnt; 10-19-2017 at 10:04 PM.
-
Interesting article in the Memphis Daily News today:
Gibson Guitar Factory Looking For New Home - Memphis Daily News
Hope that link works.
What the story says is that the Gibson Memphis Factory Building is up for sale. For those who don't know, the factory here is just off of Beale Street, in a very desirable part of town. It is a large facility.
The article says that Gibson believes the property is too big and they want to stay in Memphis, just at a smaller facility.
This could all be completely on the level, and it is true that significant square footage of the building is under-utilized. It is also completely consistent with a company doing what it can to raise cash. And that makes sense as well.
-
Wow Originally Posted by bgillon
I hope they can stay in Memphis or the area
My family is just east of there in Fayette County, so I get there at least once a year and every few years I make it to the Gibson store and factory.
Plenty of places around there that would cost less ... just not in the touristy Beale street area ...
The again ... getting away from downtown could get them and their employees away from some of the Memphis crime issues.
-
Yeah, it's my understanding that here in America Gibson requires $100,000 of inventory (based upon CoGS) purchased per year per store in order to maintain dealership status. That locks most smaller outlets out of carrying Gibsons ... but that also limits Gibson's market penetration to the Sam Ashs and GCs, mostly. And with so much of Gibson's business wrapped up in GC, which is itself floundering, that strikes me as a dangerous symbiosis for Gibson. Were GC to go into Ch11, Gibson could stand to lose their major market outlet and die of suffocation. Could they adapt in time? Would smaller shops flock to carry a brand suffering such market turmoil? Originally Posted by silverfoxx
To the point another poster made about refinancing being based on HJ being pushed out, is he not 1/2 owner? How would that work? Force him to sell his share? If that is the case (and I don't know that it is), would he be willing to do that? I mean, arrogance is a hell of a drug.Last edited by Thumpalumpacus; 10-20-2017 at 12:34 AM.
Reply With Quote
Guitar Amps built into case?
Yesterday, 05:03 PM in Guitar, Amps & Gizmos